(Recasts, adds comment, updates prices, changes byline, pvs
TOKYO)
By Jan Harvey
LONDON, June 11 (Reuters) - Gold recovered some lost ground
on Wednesday as traders took advantage of Tuesday's price dip to
buy into the market, with firmer oil prices boosting the
precious metal's appeal as an inflation hedge.
The dollar has also steadied against the euro, easing
downward pressure on gold [].
Traders remain nervous, however, that renewed dollar
strength that sparked a more than 2 percent slide in gold prices
on Tuesday could pressure the metal further if it continues.
Gold <XAU=> rose to $873.20/874.20 an ounce by 1010 GMT from
$866.00/868.00 late in New York on Tuesday.
"The oil price is picking up again," said Eugen Weinberg, an
analyst at Commerzbank in Frankfurt. "The dollar is the single
most important factor (in the gold market) but we are also
watching oil."
"Gold is an inflation hedge so if people are concerned about
that they will seek protection in gold," he added.
Oil prices firmed on Wednesday after two sessions of decline
as the market awaited key inventory data from the U.S. Dept of
Energy, which is expected to show another drop in crude stocks
[].
Its recovery is helping gold, which slipped this week after
U.S. Federal Reserve Chairman Ben Bernanke said the Fed would
seriously resist inflation pressures, raising expectations the
central bank will hike rates later this year.
INFLATION
While in the long run fresh emphasis on inflation is likely
to support gold, in the short term his comments have pressured
the precious metal as they boosted the dollar.
Gold tends to move in the opposite direction to the U.S.
currency, as it is often bought as a hedge against dollar
weakness. A stronger U.S. currency also makes dollar-priced
metals more expensive for holders of other currencies.
Later on Wednesday traders will be awaiting the reaction of
oil to U.S. inventory data and eyeing the foreign exchange
markets for clues as to the next move in gold.
They will also be watching the Fed which is due to publish
its Beige Book on current economic conditions at 1800 GMT.
"In the case it was underlining Bernanke's statement that
economic risks were fading, it could have a negative impact on
gold in the evening," said Dresdner Kleinwort analyst Peter
Fertig in a note.
Spot platinum <XPT=> meanwhile climbed to $2,012.50/2,032.50
an ounce against $1,991.50/2,011.50 late in New York on Tuesday.
The metal is supported by supply problems caused by the
ongoing power shortage in South Africa, source of some 80
percent of world platinum output.
"Markets fear growing shortages in the coming months during
the South African winter," said analyst John Meyer at Fairfax
investment bank.
Among other precious metals, spot silver <XAG=> was little
changed at $16.59/16.65 against $16.58/16.64 late in New York
Tuesday, while palladium <XPD=> was trading at $425.50/433.50
against $421.00/429.00.
(Reporting by Jan Harvey; Editing by Peter Blackburn)
